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TMI Blog2024 (5) TMI 702X X X X Extracts X X X X X X X X Extracts X X X X ..... hs and thereby cause prejudice to the assessee cannot be countenanced in law. Unless it is demonstrated by producing materials to the satisfaction of the Court that the exercise of powers under sub-section (2-A) by the AO is with mala fide intention, the writ Court shall not exercise its powers under Article 226 of the Constitution. In the opinion of this Court, the Assessing Officer for valid and justifiable reasons may exercise the powers under sub-section (2-A) till the last date of the financial year. Having regard to the initial stage of inquiry, we shall be careful to see that no prejudice is caused to the assessee and would therefore simply indicate that (i) there are certainly doubts about the correctness of the accounts (ii) multiplicity of transactions is apparent (iii) Hawala transactions are like specialized transactions and (iv) the accounts are complex and certainly voluminous. The order granting approval dated 20th March 2024 for special audit under section 142 (2-A) of the Income Tax Act takes note of every detail of the case. This would evince no doubt that at this stage, the statutory Authority is required to form a prima facie opinion and not to render a conclusi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vity, the prayer clause in W.P(T) No. 1720 of 2024 is reproduced herein below.: (i) For issuance of an appropriate writ/order/direction, including Writ of Certiorari, for quashing/setting aside the order dated 23.03.2024, contained in DIN Letter No. ITBA/AST/F/17/2023-24/1063244964(1) (Annexure-10) for Assessment Year 2022-23, wherein Respondent No. 3-Assistant Commissioner of Income Tax, Central Circle, Dhanbad has issued direction under Section 142 (2-A) of the Income Tax Act, 1961 directing the Petitioner to get it books of accounts audited by the nominated Accountant, especially because aid order has been passed in utter violation of the principles of natural justice and without even considering the show cause reply filed by the Petitioner. (ii) For issuance of further appropriate writ/order/direction to call for and set aside the approval accorded by Respondent No. 1-Principal Commissioner of Income Tax (Central), Patna vide its Letter bearing No. F. No. PCIT/Central/Pat/T-163/2023-24/5868-69 dated 20.03.2024, wherein approval has been accorded for audit of the accounts of the Petitioner in terms of Section 142 (2-A) of the Income Tax Act, 1961 by an Accountant namely, M/s. Kh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ricks etc and that huge cash transactions on accounts of receipts and cash deposits in the bank accounts, which were not recorded in your regular books of accounts. The voluminous transactions recorded in pages running in more than thousands in number, in the form of ledgers, loose sheets, cash book, registers and diaries, cash vouchers, challan book etc will require special audit to prepare receipt and payment account, party wise ledgers cash book etc to compare with your regular books of accounts and determine the transactions relating to receipts and payments of cash/cheque etc. which have not been recorded in your regular books of accounts for FYs 2012-13 to 2022-23 to determine the nature and source of receipts and incomes which are chargeable to tax as evident from the seized documents, but not disclosed by you. 5. Accordingly, you are hereby directed to get your book of accounts audited by the above nominated accountant. The nominated accountant will be required to submit the report as per rule 14A of Income Tax Rules, 1962 and in prescribed form no 6B. In addition to the same, the nominated accountant auditing your books is directed as follows:- (i) To prepare date wise rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unts maintained in Tally. When the data relating to FY 2020-21 were perused, it is again seen that sale has been suppressed to 40% approx. in respect of turnover shown in ITRs. On the basis of above, undisclosed sale has been extrapolated for FY 2014-15 to 2021-22. (ix) Evidences of cash transaction including hawala have been found from the mobile of Sri Gopal Agarwal, Ajay Kumar Jha, Om Kinkar Thakur, Nityanand Jha Rishi Saluja. During the course of search, the mobile phone of Sri Gopal Agarwal, staff of Mogina Steel Ltd was examined and found evidence of hawala transactions in his whatsapp chat with other persons/employee of company. Print out of his wahtsapp chat was taken and seized with identification mark MSO-01. After due analysis of seized documents MSO-01, evidence of huge cash transactions especially through hawala has been found. (x) Evidence of undisclosed production was found during the search. It is seen that daily production data was sent on the whatsapp of Harinder Singh Mongia, one of the directiors of M/s Mongia Steel Limited, which has not been fully accounted for in the books. (xi) Apart from the above, proposal for valuation of M/s Mongia School at Giridih, own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income Tax Act follows serious civil consequences to the assessee. It is submitted that the exercise of powers under sub-section (2-A) is hedged with the statutory requirements contained thereunder to avoid unnecessary harassment and safeguard the interest of the assessee but without recording his satisfaction as to six conditions provided thereunder, the entire burden is now sought to be shifted upon the petitioner-Company. The learned counsel further submitted that by affording five days time to respond to the notice dated 1st March 2024 the petitioner-Company was deprived of the opportunity of putting forth its objection against the proposed exercise of power under sub-section (2-A) to section 142. 6. This is a plea set up by the petitioner-Company that the order dated 20th March 2024 by the Principal Commissioner, Income Tax (Central) approving special audit does not take note of its objections, and the Assessing Officer wrongly recorded that the petitioner-Company did not submit its reply to the show-cause notice dated 1st March 2024. 7. Per contra, Mr. Kumar Vaibhav, the learned Sr. Standing Counsel while supporting the exercise of powers under sub-section (2-A) to section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the milieu of such varied requirements as provided under sub-section (2-A), this cannot be a requirement in law that the Assessing Officer must refer to each of the aforementioned factors separately and narrate the supporting facts thereof while exercising the power under sub-section (2-A). 10. In the notice under section 142 (1) to the petitioner-Company, the Assessing Officer referred to huge discrepancies in sale descriptions in the seized documents that were verified with Tally data. During the searches, several documents and digital devices were seized and the information, retrieved from the mobile phone of the directors and employees of the petitioner-Company revealed suspected Hawala transactions. The unexplained transactions and the details of suspicious transactions are spread over eleven pages in the notice dated 28th December 2023. 11. A portion of the notice dated 28th December 2023 is reproduced below: The following accounts or documents or information is/are sought under section 142 (1) of the Income-tax Act, 1961: 1. During the course of the search operation in the case of Sri Gunwant Singh Mongia, Smt Trilochan Kaur, Sri Harinder Singh Mongia, Smt Avneet Kaur at Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igital devices were found and seized with identification marks AKJ-01 to AKJ-11 and AKJ/HD/12 and AKJPO/01, In the meantime, mobile of Sri Ajay Kumar Jha, director of Mongla Steel Ltd., was examined and found evidence of hawala transaction in his whatsapp chat with other persons. Printout of those whatsapp chat were taken and seized. On verification of this, it is found that, Sri Ajay Kumar Jha has been indulged in the hawala transaction and these transactions have not been recorded in the books. The financial year wise details of the transaction are as follows:- FY Amount involved (in Rs.) 2019-20 6,50,950/- 2020-21 -- 2021-22 45,00,000/- 2022-23 1,85,02,000/- Total 2,36,53,150/- In this regard, the assessee is requested to please state the reason behind such transaction. Please state whether these transaction have been recorded in the books of accounts. Please furnish the relevant portion of the books of accounts with supporting documentary evidences. In case of no proper submission, it will be treated as unexplained transaction and in that case please show cause why not the unexplained/unaccounted/undisclosed transaction to the tune of Rs. 6,50,950/-, Rs. 45,00,000/- and Rs. 1,8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r has been indulged in the hawala transaction and these transactions have not been recorded in the books. The financial year wise details of the transaction are as follows:- FY Amount involved (in Rs.) 2019-20 2,15,52,362/- 2020-21 6,17,65,341/- 2021-22 1,09,07,861/- 2022-23 15,92,018/- Total 9,58,17,582/- In this regard, the assessee is requested to please state the reason behind such transaction. Please state whether these transaction have been recorded in the books of accounts. Please furnish the relevant portion of the books of accounts with supporting documentary evidences. In case of no proper submission, it will be treated as unexplained transaction and in that case please show cause why not the unexplained/unaccounted/undisclosed transaction to the tune of Rs. 2,15,52,362/-, Rs. 6,17,65,341/-, Rs. 1,09,07,861/- and Rs. 15,92,018/- should be added back to the total income of the concerned assessee for the FY 2019-20, 2020-21, 2021-22 and 2022-23 relevant to the AY 2020-21, 2021-22, 2022-23 and 2023-24. 1. During the course of search in the case of Nityanand Jha at Kolkata, various documents including whatsapp chat and digital devices were found and seized with identification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 69,74,618/- should be added back to the total income of the concerned assessee for the FY 2021-22 and 2022-23 relevant to the AY 2022-23 and 2023-24. During the course of the search operation in the case of M/s Mongia Steel Ltd. at Buriadih, Tundi Road, Giridih, various documents and digital devices were found and seized with identification marks MSO-01 to 58, MSO/HD/01 to MSO/HD/08, MSO/Desktop-01 and MSO/Mobile-01. Page No. 48-56 of MSO/39 represents the report of daily production of Mongia Steel Ltd., prepared by the search team during the course of search on the basis of data found in Tally maintained in office of Mongia Steel Ltd. and daily production report given by Shri Mithilesh (Employee of Mongia Steel Ltd.) to Harinder Singh Mongia on daily basis on WhatsApp, the chat of which, i.e.. Harinder Singh Mongia, was seized as MSO/Desktop-01, and the printout of the chat was taken by the search team and had been seized as MSO/41 to MSO /58. On verification of the data, it is seen that, the production of TMT has been mentioned as SMS production to the tune of 303.9002 MT and Hot charging 114.492 MT on a particular day but, in the tally software, total production was mentioned of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e accounts, volume of the accounts, doubts about the correctness of the accounts, multiplicity of transactions in the accounts and in the interests of the revenue, I am of the opinion that it is necessary to get the accounts of the assessee audited by an accountant under the provisions of section 142 [2A] of the Income-tax Act, 1961. Accordingly, approval is hereby granted for audit in terms of section 142 [2A] of the Income-tax Act, 1961 for the financial years 2012-13, 2013-14, 2014-15, 2015-16, 2016-17, 2017-18, 2018-19, 2019-20, 2020-21, 2021-2022, and 2022-23 by M/s Khetan Rajesh Kumar Co., Adharshila Complex, 306, 5th, South Gandhi Maidan, Patna, Bihar 800 001 duly empanelled for this purpose by the Pr. Chief Commissioner of Income-tax (B J), Patna vide order dated 15.02.2024. The above accountant shall complete the audit within a reasonable time and furnish a report in the prescribed form to the concerned Assessing Officer. The terms of reference as well as specific issues to be examined during the course of such special Audit shall be determined and communicated by the Assessing Officer. 14. An order passed in violation of natural justice becomes susceptible in law . Sahara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r-Company prima facie do not reflect any merit. In a proceeding under Article 226 of the Constitution, the writ Court shall not exercise its discretionary jurisdiction where the records reveal that the petitioner-Company has, in fact, no defence to object to a special audit under sub-section (2-A) to section 142. 16. For the foregoing reasons, we are not inclined to interfere with the order dated 23rd March 2024 contained in DIN Letter No. ITBA/AST/F/17/2023-24/1063244964(1). We however indicate that we have referred to some facts and made observations thereon for examining the plea of natural justice and such observations shall not be treated as an expression of opinion on the merits of the case; observations are only for the present case. To protect the interest of the petitioner-Company, we issue the following directions: (i) The time indicated in the order dated 23rd March 2024 for submission of report by the nominated Auditor is extended by a further three months; (ii) The nominated Auditor shall confine the inquiry to the matters indicated in para no. 5 of the order dated 23rd March 2024; and (iii) He shall not refer to any internal document/appraisal report prepared by the I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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